Local government institutions suffer from weak pubic financial management practices, says the global donor
Bangladesh must empower local government institutions through administrative and fiscal decentralization in order to achieve upper-middle income status, according to a new report by World Bank.
Despite a long history of local governance and recent decentralization efforts, service delivery by local government institutions in Bangladesh is hampered by limited decision-making and financial authority, lack of resources and staff, and weak capacity, the report said.
It added that local government institutions in the country suffer from weak pubic financial management practices.
The report, titled “Local Government Public Financial Management System Assessment,” was released on Thursday. It was unveiled during an event at the Amari Hotel in Dhaka’s Gulshan.
The assessment was conducted by the Policy Research Institute (PRI) on behalf of World Bank from September 2018 to March 2019.
Although spending by local government institutions as a share of GDP increased from 0.67% in 2001 to 1.1% in 2013, this is still five times lower than the average in developing countries.
Spending by local government institutions accounts for 7% of total government expenditure in Bangladesh, as compared to an average of 19% in developing countries, and 28% in industrial countries.
The relatively lower share of local government institution spending in total government expenditure indicates limited fiscal decentralization, the report said.
Addressing the report unveiling event, World Bank acting country director for Bangladesh and Bhutan Dandan Chan said: “We have seen globally that local government institutions with participation of local communities are best placed for providing basic services such as education, healthcare, water supply and sanitation, and local law and order.
“Through successive projects, the World Bank has supported the government’s decentralization agenda.
"There are successes to build on: a predictable and transparent financial resource transfer system covering all the Union Parishads—the lowest tier of local government—has improved planning, participatory budgeting, and transparency,” he added.
Weaknesses of local government institutions in public financial management identified in the assessment include limitations in planning and executing budgets, inadequate book keeping and financial reporting, lack of internal controls for cash management, and weaknesses in the audit management process, among others.
Mentioning that local government institutions in Bangladesh still maintain transaction records manually for the most part, the report stressed the need for expansion of IT use in the accounting system, integration with the government IBAS ++ system, and use of IT in administration and service delivery monitoring.
Planning Minister MA Mannan said: “Over the last decade, Bangladesh has improved its policy and legal framework, and has taken concrete steps to effectively decentralize the local government. These steps have contributed to the country’s robust economic growth that benefitted majority of the population.
"The work is not yet complete. Our government is committed to taking further measures to empower the local government.”
Recommendations made in the assessment include further administrative and fiscal decentralization, adequate staffing, strengthening monitoring capacity, improving the understanding of budgeting, implementing multi-year budgets, timely release of budget transfers, expansion of revenue collection efforts, and the strengthening of local government institution audits, among others.